Microsoft may be ready to take on Sony with its own set of motion powerful controllers for the Xbox One. The tech giant has been in talks with game developers and even is using one such manufacturer’s hardware to manufacture a controller that could come out as soon as this fall.
Sony is expected to acquire a number of companies in the next few months, with Microsoft being one of them. Sony has been rumored to be acquiring Microsoft for around $8 billion.
Activision Blizzard created a ‘Call of Duty’ game.
Avalon/Zuma Press photo
5:38 a.m., January 19, 2022 ET
Microsoft is flashing its pocketbook in order to beef up its gaming portfolio. This all adds up to a terrifying boss fight for Sony, Microsoft’s videogame system competitor.
After Microsoft said Tuesday that it will pay $75 billion to acquire gaming developer Activision ATVI -0.19% Blizzard, investors in the Japanese business are visibly nervous. Sony’s stock dropped 12.8 percent on Wednesday, the worst in a single day since 2008.
The Activision purchase, which would be Microsoft’s biggest, is a clear indication of the Xbox maker’s desire to spend more in high-quality videogame content. The deal would help Microsoft expand its gaming portfolio, particularly in what are known as AAA games, such as “Call of Duty.” Last year, the technological behemoth finalized the $7.5 billion acquisition of ZeniMax Media, the creators of iconic video game titles such as “Doom” and “Fallout.”
If Microsoft chooses to take select Activision games off Sony’s PlayStation platform, making them exclusive to Xbox, Sony may suffer directly as a result of the arrangement. The possible loss of royalty revenue, according to Citi, may amount to 10 billion yen to 30 billion yen, or $87 million to $260 million. However, this is a small point: Sony’s operational profit for the fiscal year ended in September was about 1 trillion yen.
The main concern for Sony investors is how the massive transaction would affect the whole gaming industry. In the console battle, Sony had been ahead of Microsoft. More gamers may gravitate toward Xbox if the content catalog improves.
Microsoft’s goals aren’t limited to consoles. Xbox Game Pass, the company’s Netflix-style subscription program, has more than 25 million customers. The cloud-based service is accessible on personal computers and allows users to stream games to mobile devices. The Activision partnership may help the service attract players across all platforms. With top-grossing products like “Candy Crush Saga” and “Call of Duty: Mobile,” Activision has a significant presence in mobile gaming.
In order to stay up, Sony may have to spend more money. The announcement boosted the stock prices of gaming businesses in Japan and worldwide. Square Enix gained 3.7 percent, while Capcom gained 4.6 percent. The planned $11 billion purchase of Zynga by Take-Two Interactive earlier this month boosted the value of possible acquisition targets.
But Sony should move carefully, especially since it can’t possibly compete with Microsoft on financial prowess alone. Microsoft’s operating profit is around eight times Sony’s, according to S&P Global Market Intelligence. Sony needs to keep beefing up its content, but it should focus on buying and partnering with smaller, independent game studios rather than super heavyweights like Activision. The company’s other entertainment assets—it owns a major Hollywood studio and a major music label—could provide an edge.
Microsoft’s megadeal raises the stakes in the content fight. To keep ahead of the competition, Sony will have to play smart.
Jacky Wong can be reached at [email protected]
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The print edition of the January 20, 2022, was published.
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